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Self‐Insurance and Self‐Protection as Public Goods


  • Tim Lohse
  • Julio R. Robledo
  • Ulrich Schmidt


Many public goods like lighthouses and fire departments do not provide direct utility but act as insurance devices against shipwreck and destruction. They either diminish the size and/or the probability of the loss. We extend the public good model with this insurance aspect and generalize Samuelson?s efficient allocation rule when self-insurance and self-protection expenditures are pure public goods. Some comparative static results with respect to changes in income and risk behavior are derived. We analyze the interaction of private market insurance with the public good level, both for efficient provision and for private provision equilibria. The privately provided levels of self- insurance and self-protection decrease when market insurance is available, which suggests that the state should invest more in preventing not insurable risks like wars. Additionally, the state should focus on self-protection expenditures if those are better observable than private self-protection effort.
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Suggested Citation

  • Tim Lohse & Julio R. Robledo & Ulrich Schmidt, 2012. "Self‐Insurance and Self‐Protection as Public Goods," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 79(1), pages 57-76, March.
  • Handle: RePEc:bla:jrinsu:v:79:y:2012:i:1:p:57-76
    DOI: j.1539-6975.2010.01391.x

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    References listed on IDEAS

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    Cited by:

    1. Heike Auerswald & Kai A. Konrad & Marcel Thum, 2011. "Adaptation, Mitigation and Risk-Taking in Climate Policy," CESifo Working Paper Series 3320, CESifo Group Munich.
    2. Toshihiro Ihori & Martin McGuireb, 2008. "National Adversity: Managing Insurance and Protection," CIRJE F-Series CIRJE-F-554, CIRJE, Faculty of Economics, University of Tokyo.
    3. Kai A. Konrad & Marcel Thum, 2012. "The Role of Economic Policy in Climate Change Adaptation," CESifo Working Paper Series 3959, CESifo Group Munich.
    4. Toshihiro Ihori & Martin McGuire, 2006. "Patterns of Non-exponential Growth of Macroeconomic Models: Two-parameter Poisson-Dirichlet Models," CIRJE F-Series CIRJE-F-450, CIRJE, Faculty of Economics, University of Tokyo.
    5. Doncaster, C. Patrick & Tavoni, Alessandro & Dyke, James G., 2017. "Using Adaptation Insurance to Incentivize Climate-change Mitigation," Ecological Economics, Elsevier, vol. 135(C), pages 246-258.
    6. Wen-Kai Wang & Christian-Oliver Ewald, 2010. "Dynamic voluntary provision of public goods with uncertainty: a stochastic differential game model," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 33(2), pages 97-116, November.
    7. Nicklisch, Andreas & Köke, Sonja & Lange, Andreas, 2016. "Is Adversity a School of Wisdom? Experimental Evidence on Cooperative Protection Against Stochastic Losses," Annual Conference 2016 (Augsburg): Demographic Change 145716, Verein für Socialpolitik / German Economic Association.
    8. repec:eee:eecrev:v:101:y:2018:i:c:p:230-249 is not listed on IDEAS
    9. Tim Lohse & Julio R. Robledo, 2013. "Public Self-Insurance and the Samaritan’s Dilemma in a Federation," Public Finance Review, , vol. 41(1), pages 92-120, January.
    10. Traub, Stefan, 2006. "The Provision of Local Public Services in a Risky Environment: An Application to Crime," Economics Working Papers 2006-03, Christian-Albrechts-University of Kiel, Department of Economics.
    11. Toshihiro Ihori & Martin McGuire, 2006. "Group Provision Against Adversity: Security By Insurance vs. Protection," CARF F-Series CARF-F-086, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    12. Daniel R. Petrolia & Joonghyun Hwang & Craig E. Landry & Keith H. Coble, 2015. "Wind Insurance and Mitigation in the Coastal Zone," Land Economics, University of Wisconsin Press, vol. 91(2), pages 272-295.
    13. Vesa Kanniainen & Staffan Ringbom, 2015. "The Value of NATO Option for a New Member," CESifo Working Paper Series 5399, CESifo Group Munich.
    14. repec:eee:reensy:v:96:y:2011:i:3:p:361-364 is not listed on IDEAS
    15. Grislain-Letrémy, Céline, 2012. "Assurance et prévention des catastrophes naturelles et technologiques," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/9073 edited by Villeneuve, Bertrand, March.

    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods


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